Greenback Gains Ahead Of Employment Data
- The dollar rose on Thursday as risk aversion increased ahead of Friday’s US employment report. US initial jobless claims fell more than expected, indicating a US economic recovery is in sight. The S&P 500 declined 5.64 points to 997.08. The pound dropped after the Bank of England expanded its bond purchase program and maintained the key interest rate at 0.50%. The BOE’s Monetary Policy Committee said “the recession appears to have been deeper than previously thought.” The yen was pressured by a report that Japan may be facing years of deflation. The Australian dollar declined despite an unexpected increase in Australia’s employment. The Canadian dollar fell.
- The EUR/USD declined after the European Central Bank left the benchmark interest rate unchanged at 1.00% and ECB President Jean-Claude Trichet stated that interest rates are “appropriate” and the euro-area economy won’t return to growth until 2010. The pair is supported by increased risk aversion even though the EMU area is lagging the US recovery. The EUR/USD is in a short-term uptrend. If the 1.45 resistance is broken, the pair will resume its uptrend. A correction in the stock and commodity markets will pressure the pair.
Financial and Economic News and Comments
US & Canada
- US initial jobless claims in the week ending August 1 fell 38,000 to a lower-than-expected 550,000, the fifth consecutive time claims were under 600,000, following the previous week’s upwardly revised 588,000, figures from the Labor Department showed. The 4-week moving average of new jobless claims declined 4,750 to 555,250. Continuing jobless claims in the week ending July 25 rose 69,000 to 6,310,000 from the preceding week’s upwardly revised 6,241,000. The 4-week moving average of those continuing claims dropped 148,500 to 6,278,750. The insured unemployment rate for the week ending July 25 was unchanged at 4.7%.
- Canada’s building permits increased 1.0% m/m, as we forecast, to C$5.19 billion ($4.83 billion) in June after an upwardly revised 17.5% m/m gain in May, according to data from Statistics Canada.
Europe
- Germany’s seasonally adjusted manufacturing orders rose a more-than-anticipated 4.5% m/m in June, a fourth consecutive month-on-month gain and the most since June 2007, after a 4.4% m/m increase in May, data from the Federal Ministry of Economics and Technology showed, signaling the German economy is emerging from the recession. June manufacturing orders fell a less-than-expected 25.3% y/y nsa.
- The Bank of England kept the key interest rate unchanged at 0.50%, as forecast, and increased its asset purchase program by £50 billion ($84 billion) to £175 billion.
- The European Central Bank maintained the benchmark interest rate at 1.00%, as expected. ECB President Jean-Claude Trichet said officials are “satisfied” on the ECB’s own purchase plan. “The information and analyses that have become available since our meeting on 2 July 2009 confirm our view that the current rates remain appropriate,” Trichet said, adding that the eurozone economy won’t return to growth until next year.
Asia-Pacific
- Australia’s employment unexpectedly increased 32,200 in July after a revised 23,100 decline in June, according to figures released by the Australian Bureau of Statistics. The unemployment rate held at 5.8%, the highest in almost six years. Full-time employment declined 16,000 and part-time employment rose 48,200 in July. The participation rate held at 65.3%.
- The Japanese leading economic indicators index, a measure of future economic activity, rose a slightly more than expected to 79.8 in June from 76.9 in May, according to preliminary June LEI data released by the Cabinet Office. The coincident index, measuring present economic activity, advanced to 87.8 from May’s 87.1, adding to economic recovery signs.
FX Strategy Update
